Global hedge fund investors are renewing interest in China-focused strategies after several years of heavy outflows, according to a report by Bloomberg citing the findings of BNP Paribas’ 2026 Hedge Fund Outlook survey.
A net 14% of allocators plan to increase allocations to China-focused hedge funds this year, marking a sharp turnaround from 2023, when 42% of investors were cutting exposure. Around 9% had already added capital in 2025, the survey found.
The shift comes amid a broader rotation away from US assets, with investor appetite for North America falling sharply from last year and now sitting only slightly above interest in China.
BNP Paribas said the renewed interest was driven by improving sentiment toward Chinese equities, following a strong market rebound in 2025. The MSCI China Index rose 28% last year — its best performance since 2017 — helped by optimism surrounding domestic artificial intelligence development and improving valuations, despite the benchmark remaining more than 30% below its 2021 peak.
While interest in single-country China funds is rising, allocators continue to prefer broader Asia-Pacific strategies. A net 30% of respondents plan to increase allocations to pan-Asia funds in 2026, making the region the second-most favoured destination globally after Europe. North America fell to fifth place.
The survey, conducted in December among 246 hedge fund allocators overseeing or advising on approximately $1.1tn in assets, also highlighted strong demand for discretionary macro strategies, which investors expect to be the top-performing hedge fund strategy in 2026.
Quant equity and multi-strategy funds remain in favour globally, while allocators reported that hedge funds broadly met or exceeded return expectations in 2025. Average allocator returns came in at 9.84%, slightly above target levels, with more than 80% of respondents saying their hedge fund portfolios hit or beat performance goals.
